The privatization neutrality theorem states that the share of public ownership in an enterprise does not affect welfare (i.e., any degree of privatization is optimal) under optimal tax-subsidy policy. We revisit this neutrality result. First, we investigate the case in which the private...

We provide a simple theoretical model to explain the mechanism whereby privatization of international airports can improve welfare. The model consists of a downstream (airline) duopoly with two inputs landings at two airports) and two types of consumers. The airline companies compete...